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Africa: Africa Needs $46 Billion to Tackle Power Storage - World Bank Report

12 November 2009

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Clement Nwoji, Abuja — The report of a rercent World Bank survey conducted in 24 African countries has revealed that more than $46 Billion is required per annum over the next decade to address the epileptic power problem hindering economic and industrial development in African countries.

The report noted that even if major inefficiencies are redressed, that there is currently a funding gap of $31 billion every year and much of it are in power and water infrastructure in fragile states.

The study further shows that the poor state of infrastructure in Sub Saharan Africa, its electricity, water, roads, and information and communications technology (ICT), cuts national economic growth by two per cent every year and reduces business productivity by as much as 40 percent.

Titled "Africa's Infrastructure: A Time for Transformation" the study discovered that Africa has the weakest infrastructure in the world, but ironically Africans in some countries pay twice as much for basic services as people elsewhere.

It maintained that well functioning infrastructure is essential to Africa's economic performance and that improving inefficiencies and reducing waste could result in major improvements in African's lives.

The 24 African countries surveyed include Benin, Burkina Faso, Cape Verde, Cameroon, Chad, Democratic Republic of Congo, Côte d'Ivoire, Ethiopia, Ghana, Kenya, Madagascar, Malawi, Mali, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, South Africa, Sudan, Tanzania, Uganda and Zambia.

According to the report estimated expenditures, "US$93 billion are needed annually over the next decade, more than twice what was previously thought. Almost half of this amount is needed to address the continent's current power supply crisis that is hindering Africa's growth.

"The new estimate amounts to roughly 15 percent of the continent's gross domestic product (GDP), comparable to what China invested in infrastructure over the last decade.

Startling discoveries by the survey include that the existing spending on African infrastructure is much higher than previously known, $45 billion a year and the fact that most of this is domestically financed by African tax payers and consumers.

It also confirmed that there is also considerable wastage to address, adding that a number of efficiency improvements could potentially expand the available resources by a further $17 billion.

Particularly, the report stated "However, even if major efficiencies are gained there is still a funding gap of $31 billion every year, much of it for power and water infrastructure in fragile states.

"Relative to the size of their economies, the funding gap is daunting for the region's low-income countries (who would need to spend an additional 9 percent of their GDP) and particularly for the region's fragile states (who would need to spend an additional 25 percent of their GDP).

"Resource-rich countries like Nigeria and Zambia face a more manageable funding gap of 4 percent of GDP. Particularly now with the global financial crisis, investing in African infrastructure is critical for Africa's future".

The World Bank Vice-President for the African Region, Dr. (Mrs.) Obiageli Ezekwesili said "Modern infrastructure is the backbone of an economy and the lack of it inhibits economic growth.

"This report shows that investing more funds without tackling inefficiencies would be like pouring water into a leaking bucket. Africa can plug those leaks through reforms and policy improvements which will serve as a signal to investors that Africa is ready for business."

The report recommends addressing the $17 billion annual efficiency gap and closing the remaining $31 billion annual funding gap for African infrastructure.

The World Bank maintained that closing the efficiency gap requires improving management of utilities, ensuring adequate maintenance, promoting regional integration, recovering costs while recasting subsidies to enable broader access, and improving allocation and spending of public resources.

To close the funding gap a wide range of sources will need, including public budgets, resource rents, local capital markets, private sector and non-OECD finance, as well as traditional donor assistance.

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